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Government To Discuss Air India's Aircraft Buys Tomorrow

India’s government will review the financial situation of the state-run Air India Oct. 28 and decide on the future of several aircraft purchase orders.

A panel of federal ministers, led by Finance Minister Pranab Mukherjee, was scheduled to meet today, according to an official at the civil aviation ministry.

The official says the panel of ministers, formed to look into the airline’s turnaround and financial restructuring plan, would primarily look into the airline’s performance but also consider granting additional equity to the cash-strapped flag carrier.

The ministers would also discuss Air India’s order of 27 Boeing 787 aircraft. The order is part of a total of 111 airplanes ordered by Air India and the former Indian Airlines from Boeing and Airbus. Air India ordered 68 aircraft from Boeing in December 2005, and Indian Airlines ordered 43 from Airbus in February 2006. Air India and Indian Airlines were merged in 2007 to form Air India Ltd.

A senior Air India official says the government may ask the ailing airline to prune its order for the 787 by more than half to 12.

Civil Aviation Minister Vayalar Ravi recently said, however, that Air India has no funds to buy the 787s because it is losing six billion rupees ($134 million) a month.

The ailing airline got a breather in August, when the government approved a package of 17.32 billion rupees to meet its immediate requirements.

The carrier is asking for a total of 170 billion rupees, which includes 50 billion rupees for the current fiscal year ending March 31. The airline has a cumulative debt of 400 billion rupees from aircraft acquisitions and short-term loans to maintain its operations.

The government already injected 20 billion rupees into Air India as equity, in two installments as of March 31. The airline was also promised another 20 billion rupees this year in the federal budget.

According to the ministry official, infusion of fresh equity would not only provide relief to the cash-strapped airline but also preclude it from seeking further loans.

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